"Don't judge a book by its cover. This has been a quarter of real progress," said Legg Chairman and CEO Mark R. Fetting.

Most of the loss was attributed to the cost of refinancing debt, which led to a noncash charge of $69 million, or 32 cents per share. Legg retired $1.25 billion in debt early, issued $650 million in new debt and took out a bank loan — moves that reduced the company's debt obligations by $350 million.

Legg also introduced two new funds, the ClearBridge Equity MLP Total Return and the Western Asset Mortgage Capital Corp. The total cost to launch the funds was $22.7 million, or 11 cents per share. The new funds attracted a combined $1 billion in assets in the quarter.

Overall, investors pulled $2.6 billion out of Legg funds in the quarter — the lowest in years — and Fetting said Legg was closer to a turnaround with consistent inflows. Investors in the quarter pulled $3.9 billion out of stock funds, while adding $1.2 billion to money market funds and $100 million to bond funds.

"This was our best flow story in five years," Fetting said.

Jeffrey J. Hopson, an analyst with Stifel, Nicolaus & Company Inc., said the quarter was "a little mixed." Stifel owns shares in Legg and has provided the company with securities-related services.

After factoring out the costs of refinancing and fund launches, Hopson said, "Overall, the financial results were a little under expectations."

"Fixed income is looking a little better," Hopson said. "But again, because of the markets and their equity outflow, they have seen financial pressure on the overall financial results."

Assets under management fell to $631.8 billion, down $11.5 billion from the end of March and $30.7 billion from a year ago. Market losses of $4.3 billion in the quarter contributed to the decrease.

The U.S. Securities and Exchange Commission on Tuesday blocked four companies from Owings Mills from registering to sell stock, saying they failed to disclose pending criminal charges against a person involved with the companies.